Transport Minister Sindisiwe Chikunga said the Road Accident Fund (RAF) had carefully considered the matter before cancelling post-retirement medical aid benefits for its employees.
Chikunga said the post-retirement medical aid benefit was a historical condition of service benefit provided to employees who were permanently employed with the RAF prior to May 1998.
She also said in terms of the benefit, the RAF would subsidise 50% towards the medical aid contributions on and throughout the retirement of such employees until the death of the retired employee or voluntary termination by the employee.
“The post-retirement medical aid benefit was discontinued due to not only the dire financial status of the fund, but also the long-term unsustainable financial liability that such a benefit would have on the RAF,” she said.
Chikunga said the total estimated liability on the scheme had grown from R2.3 million in April 1998 to an estimated R55 609 000 as at March 2021, according to the actuarial valuation report.
The actuarial valuation report further projected a substantial increase in the liability to R62 460 000 as of March 31, 2022, and the figure would continue to escalate exponentially considering changes in mortality rates and high inflation.
“The RAF management with due and careful consideration of the above factors and the current financial sustainability of the RAF resolved that it was not viable to continue with the benefit.
“The benefit was therefore discontinued with effect from 1 October 2021 for all eligible and active employees,” Chikunga said.
“Moreover, this termination further ensures that the provision of benefits is consistently applied, uniformly across the board, benefiting all employees.
“Whereas only a few employees benefited from this benefit in the past, it is now applied equitably and affordably amongst all employees. The fund therefore sought to apply benefits to all its employees, not just a few,” she said.
Chikunga was responding to parliamentary questions form DA MP Alf Lees, who asked the details of the post-retirement medical aid benefits that were cancelled and the reasons for the benefits being cancelled.
Chikunga said there was no alternative or equivalent benefit provided to the affected employees due to cost containment measures.
“All employees are remunerated on total employee costs and this ensures a uniform and equitable pay structure for all RAF employees.
“All employees are equally responsible for ensuring medical cover post-retirement,” she said.
The minister said on confirmation of the RAF’s legal recourse in terms of its obligation and rights, an extensive and transparent consultation process was undertaken with affected parties.
“This included written correspondence with affected parties and consultation with current and those employees eligible for the benefit.
“Following that, consultations with individual employees, and notice of termination letter(s) were issued to all affected employees in October 2021.”
Of the 107 employees, eight have since retired post-October 2021 and were not receiving the benefit.
“There are currently 88 employees in service affected by the cancellation,” she said.